Was it a win or a loss?

The New Albany Schools continued its efforts this week to explain to district taxpayers that the
"interest rate swap" it sold in 2007 was a good idea.

In an article on the district's website, the district explains that there were facts "not
captured" in the
Dispatch article Saturday that first publicly revealed the swap, and the $6.2 million
termination fee the district paid investment bank Dexia last month. The district release said:

"Here are key facts regarding the bond refinance:

Taxpayer money was not at risk. There were safeguards built into the 2007 transaction
that protected the district from losing money.

The district realized $1.3 million in net savings over the two related transactions in 2007 and
2012. This figure includes all fees, costs and the price of the final termination of the
bonds.

These transactions are appropriate and legal for public school districts under Ohio Revised
Code, Chapter 133. They have been audited by state auditors and found to be in compliance
with the rules and regulations. The district enjoys an eight-year record of clean, successful
audits."

But the Moody's analyst who reviewed the deal told
The Dispatch today that the district was able to save some money on last month's
refinancing of the swaps only by combining three bond issues together -- including one that had
nothing to do with the swaps, construction bonds from 2003.

"Had they treated the debt issues to the swaps independently, there would have been a loss
there," said Andrea Stenhoff, with Moody's Investors Service.

Had interest rates gone up, and Dexia owed the district money, the district would have been
facing some increased counter-party risk as to whether Dexia could pay.

"It's clear that Dexia is not in as good of shape as when they issued this agreement" in 2007,
Stenhoff said.

Did the district actually make money? It depends on how you look at it.

For example, say gasoline is $4.20 a gallon, and I come to you and say: "I'll pay you $1,000 if
you pay me $4.20 a gallon until 2029, and I will buy the 40 gallons of gas you use each week and
give it to you." You agree. You are trading a fixed payment for one that varies with gas prices.
You are betting gas prices go up.

If gas goes up to $6 a gallon, you definitely won. You got the $1,000, plus the 40 gallons a
week at a cost $1.80 a gallon below market, a savings of $3,700-plus a year. If we terminate this
agreement, I owe you some money -- because why would you want out of this great deal?

But what if gas goes down to $1 per gallon? It's getting tougher to claim you still won. Yes,
you got the up-front $1,000, but your gas is now costing you $128 more a week than it costs
everybody else who didn't do this. It's starting not to sound so great. How long will this go on?
Who knows. But right now I'm making $6,600-plus a year on this swap.

So you come to me and say: "What's it going to cost to get out of this?" And I say, "Well, let's
do the math. Right now I'm making $128 a week, carry the one -- I'll let you out for
$50,000."

Did you lose money? That $50,000 is based on what it would cost you to keep paying $4.20 a
gallon -- just what you agreed to all along. And you did get the up-front $1,000.

On the other hand, you've effectively locked in an above-market rate until 2029, while everybody
who didn't do this is benefitting from the record low gas price -- and saving tons of money.

But that's being a Monday-morning quarterback, you say. And so it is.

“Your confidence in our action is important to us,” Mark Ryan, a New Albany board member and
liaison to the Financial Review and Reporting Committee, said in the district press release dated
Tuesday. "Residents who have further questions regarding this bond refinancing should contact a
member of the board, the treasurer, or the superintendent for complete, accurate information."

We called Ryan and the rest of the school board seeking just that information, but no member
returned our call.